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Bob Diamond should take his bonus and sack his traders

This trend for senior executives of scandalised firms to waive their bonuses is not a healthy development. It says to the mob that if you screech loud enough the rich will eat themselves. The targets of bullying and violent threats are sanctioning and legitimizing those threats. Hearing an aggressive tone they immediately hand over their lunch money to save themselves the trouble of a wedgie and a pinched nipple. It will only encourage more of the same.

Obviously there is a lot more to learn about the events at the center of the current conflict, and this post is at least 50% speculation. I want to talk about how my principles apply to the facts as I understand them, and if the facts change I’ll update my opinion.

The mob’s chosen hate figure is Bob Diamond, whose leadership did not start until after the events had apparently concluded. He is the target, and people want him to be accountable as CEO but accountability follows control which, it seems, he did not have. The mob thinks this is a moral issue and the buck stops with the boss, but he wasn’t the boss at the time which makes this demand a lynching.

Rather than pandering to them Diamond should act, as he has before, in his own long-range self-interest and take responsibility now for sorting out the mess. Acting honestly and consistently he can do the right thing and create something resembling a win-win outcome for him, Barclays and the mob. First, if he was involved directly then he should indeed resign and take the resignation benefits he is due according to the terms of his contract. If he’s not involved, then he should not accept the guilt being pushed on him and he should keep the bonus his contract says he deserves and stay in his job.

Next, the traders that deserve it should come under fire for the dishonest conduct attributable to them. Some of them may be disappointed at this apparent disloyalty, but if their conduct was criminal then they get what they deserve. Even if their conduct was not technically criminal some will have breached contracts and failed to deliver real value as their employer wished. Diamond should follow Murdoch and audit his company’s logged communications to identify wrong doers. He should highlight relevant cases to the police and clean out.

This is about justice, it is about your right to what was agreed in your contract and a dispassionate judgement as to whether the agreed criteria are met. But people must earn their keep spiritually as well as financially. Actual criminals should expect zero sympathy, which they should have earned by avoiding criminality, and all those involved will have plenty of time to reflect on the integrity and honesty that they failed to exercise. I’ve no doubt a few of them will complain that it was the culture and they would have lost their positions if they didn’t use the same tricks as everyone else used (Bob Diamond, disappointingly, seems to have made the same claim for Barclays). In fact, it was not in anyone’s real interests to act dishonestly. That much is becoming apparent in the share price. I know that those involved should have known better and I believe that they probably did know better. Getting swept up in a negative culture demonstrates a lack of independent spirit and a disturbing willingness to evade the certain knowledge that what you are doing could lead to more trouble than it is worth.

Meanwhile, Diamond should not accept any guilt that he did not earn, or reproach himself for failing to fix what he did know know or could not control. In addition, his visible actions with regard to his bonus should match his judgement of his own conduct. It’s possible he’s decided he is guilty, but continuing the fashion for bonus-waiving will not help him next year. If guilty he should resign and find another way to earn his keep out of the way of the mob. If he is innocent, then protesting as much won’t get him anywhere. He should ignore the media and take action that will change his company’s culture and lay out his expectations unequivocally: that loyalty is earned by producing real value.

Note: the author owns a small number of Barclays shares

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Simon Gibbs

Simon is a London based IT contractor and the proprietor of Libertarian Home. Working with logic and cause-and-effect each day he was naturally attracted to nerdy libertarianism and later to the benevolent logic of Objectivism. Find him on Google+View all posts by Simon Gibbs →

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9 comments for “Bob Diamond should take his bonus and sack his traders”

I agree with you generally. However I think we are in a realm now, thanks to the Government, where the normal rules of contract, justice, etc no longer apply. What we have learnt over the last few days, months and years is that our banking system by 2008 was corrupted and flawed beyond redemption.

In 2008 it should have been left to die and then everyone involved in the misdeeds would have been punished and a new banking system would now be forming out of the embers of the old.

However Gordon Brown saved it and now all these problems that should have died with the banks are being revealed and people are rightly looking for some justice…

Our system of Government and Crony-Capitalism is now so flawed and so tarnished I no longer know whether the problems can be resolved in a reasonable manner. My feeling is that we are like a cowboy shot in stomach — doomed to die a very slow and painful death. We are experiencing our fall, just like Rome and all the great civilisations before us.

James Rigby

Jun 29, 2012 at 12:08 pm

^ +1 Corrupt and/or inept politicians, criminal journalists/editors/proprietors in the media, a banking system being artificially propped up while they make false representations to improve their credit ratings, a technical failure which results in tens of millions wondering if they can get to their money, the list goes on….

It’s not quite the four horsemen of the apocalypse, or signs of imminent Rapture, but we are seeing a disintegration of the “establishment” and any vestiges of respect that the ordinary people had for it. The time is ripe for people who want to take control of their own destiny to be out there, persuading the people, forming a movement, and helping to build a better society without the state’s bodged interference and corrupt medding. Now, where to find such a group of people to kick start this revolution?

The problem for Bob Diamond is that there is more to this than just the few ‘rogue traders’ and their silly comments about champagne which have provided the scandal-sheets with their front page stories.

1. The ‘rogue trading’ went on a Barclays Capital. He was head of BarCap at the time.

2. Barclays itself was also engaged in manipulating LIBOR in order to protect themselves from ‘unwanted speculation as to their liquidity’, i.e. to make the bank appear in better shape than it was. This, to me, is at the very least deceitful as the result was to fool the markets and their owners* by concealing from them the true state of the business. The fact that other banks may also have been doing this (no doubt we shall find out the exact details in the coming weeks and months) is not a convincing argument. As the head of BarCap and a member of the SMT Diamond would have known the true state of BARC.

Generally, a contract voluntarily entered into by both sides should be inviolate however contracts entered into in an environment where the state has skewed the playing field in favour of vested interests is not equivalent to a truly voluntary contract.

Diamond is a beneficiary of the crony capitalist system, which is, itself, corrupt and his benefits gleaned from that system are, therefore, corruptly acquired.

I must register my disagreement on the point about individual contracts being involuntary on account of their environment. No they weren’t. The unreal and skewed circumstances are visible to us, and should be visible to the banks, but even if they weren’t contracts should be inviolate anyway. Logically, if I make a contract to provide solar energy and foolishly fail to include a “subject to availability” clause, I should expect to be held to accountable to the terms regardless of whether the sun is shining.

Also, strategically, I don’t see us winning the fight for property rights and sanctity of contract if we ignore those same principles and fail to support bankers who want to keep the bonuses that they earned according to the terms of their contracts. We must “be the change”, “lead by example”, or whatever. We can’t just join in with the unprincipled nonesense when we decide we don’t like the circumstances or it seems expedient.

Tim Carpenter

Jul 2, 2012 at 12:31 pm

If a salesman fudges figures or breaks the law to gain commission, then why should a party honour the payment of that commission? If, however, the sales were made of a product that was not legal and both the salesman and the sales company knew of it, and connivance was in play, then to not pay commission is compounding the guilt of the sales company.

Punishment should come from the illegality. Later, it can be decided that the bonus was ill-gotten, but that is for the courts to decide, not the mob, IMHO.

Rob Waller said: “We are experiencing our fall, just like Rome and all the great civilisations before us.”

Yep.

Tim Carpenter

Jul 1, 2012 at 1:30 am

I agree with Rob and Ken and in so doing i want to also reiterate that i agree the broad point of Simon’s about pandering to the mob.

In 2008 Ed Balls blinked. Let’s not forget that. it was in Accountancy Hall, IIRC, on a Saturday. At that point the opportunity was lost. Instead of getting shares for new capital, it was handed over with little pain in comparison. Lessons were not fully learned.

The Rule of Law should be upheld without fear or favour. Wrongdoing punished, contracts broken subject to the wronged parties deciding for themselves.

While we have a monopoly currency it will always result in the insiders stiffing the end “customers”.